May 8, 2021
Food and beverage manufacturers are facing higher input costs across their businesses, leading to a jump in the prices consumers pay for everything and the pressure is coming from all sides.
Beverage makers are facing a jump in expenses for packaging like aluminum. Meat prices are on the rise as the cost of grain to feed animals. A surge in freight, transportation, and manufacturing costs as well as pandemic-related expenses also are weighing on producers.
These come on top of investments by the food industry in innovation to respond to consumer trends, boost their e-commerce presence, and lessen their environmental footprint.
According to analysts, the prices have increased because of a certain raw material, or feed for animals, but never has there been a storm hit packaging, transportation, cost of goods, all of the above, while at the same time there have certain overarching issues that the industry is coping with like sustainability
It’s a mess. It really is, and as a result, the money has to come from somewhere. Coca-Cola, Unilever, Nestlé, Mondelez International and General Mills are just a few of the companies whose executives have announced price increases in recent weeks or telegraphed to Wall Street that hikes are coming later in 2021 to offset rising expenses.
We now see broad-based inflation across our various commodities, packaging materials and transportation costs,” Mark Schneider, Nestlé’s CEO, told analysts. “Not all of these items can be hedged, and our hedging cover for a number of commodities will run out over time. We are raising prices where appropriate.”
Any further increases in food and beverages would come on top of pressure already placed on the industry. The six major grocery food groups measured by the department has increased in the last year, ranging from 1.6% in dairy and related products to 5.4% in meats, poultry, fish, and eggs.
The jump in expenses is causing food and beverage manufacturers to assess all aspects of their business in a bid to wring out costs, including their product mix, supply chain and promotions.